Antrim Energy Inc. ATGYF

RE: The spin cycle on royalties...

[rfk67]

It's the NG price! If there are layoffs in Calgary it will be due to the low price and blaming it on a program that won't even take effect until 2009 is perplexing. Rig utilisation dropped from the 90's to the 40's before there even was a royalty report after all. If you run the numbers from the past years using the new royalty rates you'll find that the profitable plays would have still been exploited and the activity would still have been there. If I'm wrong then would someone please show me a company that would have failed or a specific play that would have been cancelled because of a relatively minor difference in expected cash flow. As for costs I was under the impression that rig rates have come down substantially (only one industry source, I could be wrong) and that the costs of drilling horizontal wells (a small piece but still) are down something like 30% in the past year and the service companies rates are down and continuing to drop as well. It's in response to the lowered demand of course but that was to be expected and it's the other side of rocketing costs when demand is sky high and the sector is running full out. Just take a look at what happened to rig costs in the North Sea once activity picked up, even though the UK gov't increased their take. No royalty program can save the industry with an unprofitable NG price and the new system won't kill the sector when the commodity price rebounds.